1. Field of the Invention
The present invention relates to a system and method for trading taxable and non-taxable securities and/or financial instruments; and more particularly to a computer-implemented system for automatically executing market orders for Certificates of Deposits, Discount Notes, CMOs, Corporate Bonds, High Yield Bonds, Illiquid Agency Securities, Mortgage Pass-Through Securities, Secondary Zero Instruments, and Municipal Securities.
2. Description of the Prior Art
New client demands, technological innovations and tighter regulatory controls are changing the shape of the money management industry. A new trend in asset management now provides clients with systems that allow execution of trades without concomitant fees. The evolution of the Internet and the development of new technological capabilities are pressing security houses to develop methods that facilitate the need for electronic trading. In traditional asset management, customers may be advised by financial advisors/investment executives who work with traders to execute securities trades on behalf of the customers. When a customer desire to trade securities, the ability of a trader to communicate efficiently with dealers can be the difference between profitability and un-profitability for the customer. Therefore, the need for highly efficient electronic trading is extremely valuable.
With the growth of electronic trading, however, comes concerns about the lack of price transparency and liquidity of securities. Accordingly, the SEC and other regulatory bodies have called on the National Association of Securities Dealers (NASD) to: (1) adopt rules requiring dealers to report transactions to the NASD and to develop systems to receive and redistribute transactions prices on an immediate basis; and (2) create a system for transactions to enable regulators to take a proactive role in supervising the corporate debt market rather than only reacting to complaints brought by investors. Levitt, Arthur, Chairman of the United States Securities and Exchange Commission, Sep. 9, 1998, The Importance of Transparency in America=s Debt Market, Speech at the Media Studies Center, New York, N.Y. As stated by Chairman Levitt, A[t]ransparency, disclosure and accountability . . . are the essential ingredients to confidence. And without [confidence] . . . markets can neither sustain long term growth not adapt to a rapidly changing environment. Ibid.
The prior art has recognized the need to adopt computerized trading systems. U.S. Pat. No. 4,942,616 to Linstroth et al. discloses an apparatus and method for use by a broker that includes a memory for holding a number of market prices, each corresponding to a security or a commodity. A speech synthesizer provides price quotes to customers over the telephone. The apparatus is also capable of reporting price trigger violations to a pre-determined telephone number.
U.S. Pat. No. 5,758,328 to Giovannoli teaches a computerized system and method for forming a computer-based communications network, which includes network buyers or network vendors. The system allows for the processing of requests for quotations for goods and services through at least one central processing unit.
U.S. Pat. No. 4,674,044 to Kalmus et al. teaches a data processing apparatus that creates an automated trading market for one or more securities. This reference discloses a system that includes means for retrieving the best obtaining bid and asking prices from a remote database.
None of these or other references, however, teach a system or method that includes a price discovery module for sending Requests for Quotes (RFQ) to pre-determined dealers and for receiving/capturing dealer responses to the RFQs. Moreover, the prior art fails to show a system having means for participants to access historical data for price and trade information. In addition, there is needed a system or method that allows a user who sent the RFQ to either accept the best response and execute the trade as an agent or improve the best response and execute the trade as a principal.